While plenty of high-yield opportunities exist, investors must always consider the safety of their dividend and the total return potential of their investment. It is not uncommon for a struggling company to suspend high-yielding dividends and subsequently result in precipitous share price declines.
TheStreet Ratings' stock rating model views dividends favorably, but not so much that other factors are disregarded. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e. how much one is willing to risk in order to earn profits?; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to its stock's performance.
These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. As always, stock ratings should not be treated as gospel — rather, use them as a starting point for your own research.
The following pages contain our analysis of 3 stocks with substantial yields, that ultimately, we have rated "Buy." Collectors Universe (NASDAQ: CLCT) shares currently have a dividend yield of 10.00%. Collectors Universe, Inc. provides authentication and grading services to dealers and collectors of high-value coins, trading cards, event tickets, autographs, memorabilia, and stamps in the United States. The company has a P/E ratio of 16.72. The average volume for Collectors Universe has been 38,100 shares per day over the past 30 days. Collectors Universe has a market cap of $110.7 million and is part of the diversified services industry. Shares are up 30% year to date as of the close of trading on Friday. TheStreet Ratings rates Collectors Universe as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 13.9%. Since the same quarter one year prior, revenues rose by 10.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- CLCT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, CLCT has a quick ratio of 1.95, which demonstrates the ability of the company to cover short-term liquidity needs.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Diversified Consumer Services industry and the overall market, COLLECTORS UNIVERSE INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for COLLECTORS UNIVERSE INC is rather high; currently it is at 66.10%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 16.42% significantly outperformed against the industry average.
- Net operating cash flow has increased to $3.92 million or 30.78% when compared to the same quarter last year. In addition, COLLECTORS UNIVERSE INC has also vastly surpassed the industry average cash flow growth rate of -20.49%.
- You can view the full Collectors Universe Ratings Report.
- The revenue growth greatly exceeded the industry average of 10.5%. Since the same quarter one year prior, revenues rose by 24.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The strong earnings growth this company has enjoyed -- up -- has apparently played a role in driving up its share price by a solid 25.70%. In addition, the rise in the general market has likely contributed to this stock's strong performance during this past year.Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
- MARTIN MIDSTREAM PARTNERS LP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, MARTIN MIDSTREAM PARTNERS LP increased its bottom line by earning $1.33 versus $0.56 in the prior year. This year, the market expects an improvement in earnings ($1.89 versus $1.33).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 33.4% when compared to the same quarter one year prior, rising from $12.47 million to $16.64 million.
- Net operating cash flow has significantly increased by 4474.11% to $65.39 million when compared to the same quarter last year. In addition, MARTIN MIDSTREAM PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -25.48%.
- You can view the full Martin Midstream Partners L.P Ratings Report.
- The revenue growth came in higher than the industry average of 6.4%. Since the same quarter one year prior, revenues rose by 17.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has increased to -$19.37 million or 45.15% when compared to the same quarter last year. In addition, GOLUB CAPITAL BDC INC has also vastly surpassed the industry average cash flow growth rate of -335.21%.
- The gross profit margin for GOLUB CAPITAL BDC INC is currently very high, coming in at 70.80%. Regardless of GBDC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GBDC's net profit margin of 55.80% significantly outperformed against the industry.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Capital Markets industry average. The net income increased by 7.2% when compared to the same quarter one year prior, going from $11.43 million to $12.25 million.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- You can view the full Golub Capital BDC Inc. Class B Ratings Report.
- Our dividend calendar.